Honda’s recent proposal to turn Nissan into a fully owned subsidiary could bring the $58 billion merger talks between the two Japanese automakers to a standstill, potentially jeopardizing plans to create the world’s fourth-largest car manufacturer. According to a report from Financial Times, this dramatic shift in strategy comes just over 40 days after the companies first announced discussions in December. Honda is reportedly under pressure from both its shareholders and internal stakeholders to take full control of Nissan, which is struggling with weak financial performance.
Initially, the companies had agreed to form a joint holding company structure that would allow them to maintain both brands and decision-making autonomy. However, tensions began to surface early in the talks, with disagreements over equity ratios and asset valuations. Sources familiar with the situation revealed that Nissan executives were caught off guard by Honda’s new proposal, and while a board meeting is expected later today, the company has yet to finalize its response.
Renault, which has a stake in Nissan, has been vocal about the negotiations, urging the Japanese automaker to seek a higher premium from Honda to account for the shift in control. Renault is concerned that prolonged talks could divert attention from Nissan’s pressing need for a financial turnaround.
Nissan’s market capitalization has fallen to just a fifth of Honda’s, skewing the negotiations in Honda’s favor, and creating an imbalance that has raised concerns about the future of the deal. Shares in both Nissan and Honda surged following the media coverage of the new proposal, which was first reported by Japanese outlets.
Honda’s CEO, Toshihiro Mibe, had previously emphasized the importance of the joint holding company structure to protect both brands. However, he had also stated that the merger would only proceed if Nissan successfully executed a turnaround plan, which includes reducing production capacity by 20 percent and cutting 9,000 jobs.
